Bill Kamboukos

FHA Borrowers May Soon Be Able To Use $8,000 Tax Credit at Closing

The details are still a bit unclear as to how the program will be implemented. However, HUD Secretary Shaun Donovan announced this past week that first-time buyers using FHA loans would soon be allowed to "monetize" the $8,000 federal first-time buyer tax credit and use the funds for their down payment.

"We, like you, believe that this new tax credit is not only a tremendous opportunity for first-time home buyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing. ... We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a down payment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to "monetize" the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit," Donovan told attendees at the National Association of Realtors, Real Estate Summit in Washington.

As mentioned, the details of the program still haven't been announced, but the revised policy seems to offer a benefit to potential first time home buyers without the full down payment for the purchase of a home.

The policy should help boost the housing market by allowing first-time buyers using FHA loans to stretch their dollar by using the federal credit at settlement as part of their closing funds, rather than waiting months for a refund on a tax return. "This allows them to solve the ‘chicken or the egg' question: the promised tax credit or the closing" that allows them to get the money, said Rob Dietz, director of tax issues of the National Association of Home Builders, adding: "They have a right to this credit amount as a first-time buyer. It makes sense to turn this credit into their home equity."

Still two questions remain unanswered: Will first-time home buyers be able to monetize the tax credit using any FHA-approved lender? Or will they need to be working with a state housing finance agency, which usually requires additional documentation and provides financial and homeownership counseling to those who qualify for their help?

"We will attempt to answer those questions once we've published our mortagee letter," HUD spokesman Brian E. Sullivan said.

If buyers could monetize the tax credit, they would essentially receive a short-term bridge loan for the amount of the credit (which could vary based on their income and the home's sales price). They could apply that money to their down payment or as additional equity in their home. For buyers working with a state housing finance agency, the monetized tax credit often becomes a "soft" second mortgage, which they must pay back once they receive their tax refund.

Dietz added that," There's no doubt that the purpose of the tax credit is to stimulate housing demand. We estimate new and existing home sales will increase by 160,000. But it's not a tax credit that is in anyway large enough to reinflate the market-it's just a useful and limited tool to smooth out the market," he said. "As for causing sales to return to 2005 levels or push prices up, this tax credit is not capable of doing that."

As the details of the new program and the mortgage letter from FHA are published we will provide additional information and details. The final version of this program will tell the story of whether or not this will be a program that enables first time buyers an option to purchase a home and truly take advantage of the $8,000 home buyer tax credit at closing.

For more information on home purchase loan or refinace programs for existing and potential home owners, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com

Housing Nearing A Bottom?

- Chairman Bernake Thinks So

Last week, in regard to the real estate market, Federal Reserve Chairman Ben Bernanke said housing "has shown some signs of bottoming" after three years of decline.

"Although some of the boost to sales in the market for existing homes is likely coming from foreclosure-related transactions, the increased affordability of homes appears to be contributing more broadly to the steadying in the demand for housing," he said. This was welcome news to the real estate markets, as new home sales show a large up tick as well.

Chairman Bernanke noted the average rate for a 30-year fixed-rate mortgages has fallen nearly one and three quarters percentage points since August, and falling inventories is setting up for a recovery in housing starts.

In addition, the Fed chairman said the economy should bottom out and "turn up later this year," assuming that gradual repair of the financial system continues.

Chairman Bernanke noted that the U.S. economy has "contracted sharply" over the past half year, and that he sees "further sizable job losses" and a rising unemployment rate in the coming months.

However, he also stated that the U.S. economy could return to growth later this year, provided that improvements in the financial markets continue.

He noted that, "In coming months, households' spending power will be boosted by the fiscal stimulus program, and we have seen some improvement in consumer sentiment."

"Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, implying that the current slack in resource utilization will increase further," he said. "We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly."

This was certainly an encouraging statement from one of the most powerful monetary policy figures in the world. Whether we are seeing a bottom or not is still a question to be answered. However, anecdotal and economic evidence we are certainly seeing an increase in home sales, coupled with low interest rates, which has only helped the housing market. We will see in the coming months if we can continue to sustain momentum and finally gain traction in the real estate market.

For more information on home purchase loan or refinace programs for existing and potential home owners, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com

Government Expansion of Foreclosure Prevention:

Second Liens and Hope for Homeowners Modified

The President said this past week that government is expanding its foreclosure prevention program to cover second mortgages and to direct more troubled borrowers to the Hope for Homeowners program. Much like the rest of the program recently announced however, we will withhold judgment until results start being achieved.

The president's current $75 billion program has gotten off to a slow start. Loan servicers only recently started taking applications and many delinquent borrowers have complained about not being able to qualify for the program.

The administration is now seeking to address some of the concerns by changing the original modification plan, which calls for adjusting eligible borrowers' loans so monthly payments are no more than 31% of pre-tax income.

The main issue with the current program for many borrowers is that up to half of at-risk borrowers have second liens, according to recent government reports.

Under the administration's new program, the interest rate on second mortgages will be reduced to 1% on loans where payments cover interest and principal and to 2% for interest-only loans. The government will subsidize the rate reduction, with the money going to the mortgage investor.

The servicers will be paid $500 for each modification and an additional $250 annually for three years if the borrower stays current. Borrowers can receive up to $250 per year for five years to pay down their first mortgage.

In addition, investors can also receive a payment in exchange for extinguishing the second lien. They would receive 3 cents on the dollar for loans more than 180 days delinquent and between 4 cents and 12 cents for less delinquent loans, depending on the borrowers' debt levels.

Servicers who join the new program must modify second loans when a borrower's first mortgage is adjusted. It will likely take a month to implement is the information being presented.

In addition, the administration said it is now requiring servicers to offer troubled borrowers access to Hope for Homeowners as a modification option if they qualify.

Expanding Hope for Homeowners would address one of the major holes in the original Obama foreclosure prevention plan. It helps homeowners whose homes are now worth far less than their mortgages.

Servicers would now have to reduce the principal to 93% of the home's value. The change would also reduce the program's high fees, which turned off many troubled borrowers.

As an incentive to participate, servicers will be paid $2,500 for each refinancing, while lenders who originate the new loans will receive up to $1,000 a year for three years, as long as the loan remains current.

These plans are all steps in the right direction to try and help additional borrowers who have not had results with the current initiatives. How effective they will be is still yet to be determined.

For more information on government programs for refinancing, or home purchase programs for existing and potential home owners, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com

Keys To Qualify For A Home Purchase Loan:

What You Need In The Current Market

With home prices having decreased significantly, home buyer tax credits and the lowest interest rates in a generation, home affordability has dramatically increased. As a result we have seen a tremendous increase in the amount of new buyers ready to purchase a home now. However, the main question that many of them have is what do I need, in order to be able to purchase a home in the current market? This answer will vary slightly, but here are a few things that everyone will need to be able to qualify for a home purchase currently. This is a good starting point to gauge your ability to purchase now or you need to get a few things in line before you make the move.

1) DOCUMENTED INCOME: In the current marketplace you will need the ability to document your income. If you work a regular job where you receive hourly or salaried pay, one month's pay stubs and your last 2 years W-2's will suffice. If you are self-employed or receive commissions as part of your salary, then expect to have to provide your last 2 year's full tax returns. The bottom line however is that in the current market lenders will want you to be able to document and fully prove any income you state you receive.

2) 620 Credit Score: While credit standards are still more lenient on programs such as FHA financing or VA financing for Veterans as opposed to conventional financing, the minimum is now a 620 credit score. This is a practice that many lenders have implemented and will soon be an across the board requirement. If you score is below this level, you will be best served to begin the process of evaluating and repairing your credit score, prior to being able to purchase a home.

3) DOWN PAYMENT: While there are a select few programs that will allow for 100% financing (Veterans Administrations Loans, USDA Rural Housing), the majority of all purchase loans will now require a minimum of a 3.5% down payment for FHA financing or 5% for conventional financing. This number increases if the property is a second home or investment property. Of course first time buyers can also now take advantage of the $8,000 home buyer tax credit through November 30, 2009. However, this credit can not be received until after closing on the home. Therefore, down payment must be saved up for most buyers prior to purchasing a home.

With home buying on the rise, these are just some of the many items to consider when purchasing a home and qualifying for a home loan in the current market.

For more information on home purchase programs for existing and potential home owners, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com

The making homes affordable program has been a program that has been discussed a great deal lately. This newest program from the government allows current homeowners to potentially refinance their mortgages if they owe between 80% and 105% of the current value of their home. As well as modify their mortgages if they are in a situation where they are further upside down or not able to qualify for the refinance program. Please see our previous articles for more details on these programs.

The one main qualification however to be eligible for this program is that your loan must be owned by Fannie Mae or Freddie Mac. So the question we have received recently is how does one know whether Fannie or Freddie owns their loan? Keep reading to find out.

You may lookup if Fannie Mae owns your loan online at: http://loanlookup.fanniemae.com/loanlookup. You type in your address and ZIP code and verify that you're the owner of the dwelling, and the system will tell you whether Fannie owns the loan. Alternately you may call Fannie from 8 a.m. to 8 p.m. Eastern time, at (800) 732-6643.

You may look up if you Freddie Mac owns your loan online at: https://ww3.freddiemac.com/corporate. You have to provide your full name, address, city, state, ZIP code and Social Security number, and verify that you're the owner of the dwelling. Alternatively you may call Freddie from 8 a.m. to 8 p.m. Eastern Time at (800) 373-3343.

Finally, there is also a Making Home Affordable Web site from the Federal Government with this information as well, located at: http://www.makinghomeaffordable.gov/loan_lookup.html. The same links and phone numbers above are provided there, as well as some additional information on the website.

These tools will allow you to find out whether you are potentially eligible for one of these programs, but not necessarily qualify you for either program. For more information on your options feel free to contact your existing loan servicer or call us for more information.

For more information on programs for existing and potential home owners, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com